Gold close to nine-month low as US treasury yields rise
Bengaluru — Gold prices on Thursday hovered near a nine-month low hit in the previous session, as rising US treasury yields kept the non-yielding bullion under pressure.
Spot gold was steady at $1,711.61/oz by 2.57am GMT, having dropped to its lowest level since June 9 at $1,701.40 on Wednesday. US gold futures dipped 0.3% to $1,710.20.
“In the short term, undeniably gold is on a bearish trend. Most fundamentals are stacked against it: higher yields, dollar that refuses to drop further, recovering economic trajectory, picking up of vaccination rates,” said Howie Lee, an economist at OCBC Bank. “So, even with inflation expectations ... markets are preferring to choose other instruments that express reflation view.”
Benchmark US treasury yields held near 1.5%, threatening gold’s appeal as an inflation hedge as they increase the opportunity cost of holding bullion, which pays no returns, while the dollar rose against rivals.
Investors now await Federal Reserve chair Jerome Powell’s remarks before a virtual Wall Street Journal jobs summit at 5.05pm GMT, for clues on the central bank’s monetary policy outlook. Several Fed officials have downplayed the rise in yields as a reflection of improving economy, while maintaining they will keep policy unchanged.
The market will need more than “jawboning” if the Fed is serious about keeping interest rates low, “but in the absence of that, the market would continue on its own path, which is higher yields and steepening of the yield curve”, Lee said.
The US Senate delayed the debate on a $1.9-trillion Covid-19 relief bill until at least Thursday.
Reflecting investor sentiment, holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, fell to their lowest since May 2020 on Wednesday. Silver rose 0.1% to $26.11/oz, while palladium eased 0.3% to $2,346.36. Platinum shed 0.7% to $1,159.35.
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